Tesla’s Musk to Deliver First Model X SUVs Tonight

Tesla Motors Inc., the smallest publicly held U.S. automaker, hands over the first of its Model X sport utility vehicles Tuesday evening amid growing scrutiny of Volkswagen AG, one of the world’s biggest car companies, after the admission that it cheated on emissions tests.

Hybrid and electric cars have struggled to gain traction with mainstream consumers amid lower gasoline prices. But Tesla — which promotes its Model S with the line “Zero Emissions. Zero Compromises.” — may see a bounce from the growing “dieselgate” scandal that has engulfed VW and cast a shadow on the German auto industry.

The all-electric Model X, the second car in Tesla’s lineup after the Model S sedan, is crucial to the Palo Alto, California-based company’s efforts to both scale its manufacturing and broaden its appeal. After years of delays, the question now is if Tesla, run by Chief Executive Officer Elon Musk, can ramp up production of the X fast enough to meet its lowered sales target for 2015. Much of Tesla’s sales are back- weighted to the fourth quarter, raising the stakes for a smooth — and steep — production increase.

“We’ll see if Tesla can supply enough Model Xs fast enough to satisfy the waiting list,” Jack Nerad, executive market analyst at KBB.com, said in an e-mail.

German Challenge

The Model X will compete for customers with premium luxury SUVs that are largely made by German automakers, including the Audi Q7, the BMW X5 and the Porsche Cayenne. While it is only certain diesel models made by Volkswagen that are under investigation in the emissions-cheating scandal, Peter Altmaier, chief of staff to German Chancellor Angela Merkel, challenged the nation’s carmakers to prove that their country remains a leader in the auto industry by beating Tesla in the nascent electric-car market.

“I know Elon Musk, I met him last year, he’s an impressive guy and his Tesla car is an impressive car,” Altmaier said in an interview with Bloomberg Television in Berlin. “I would be very pleased if the German carmakers would be able to produce an e- car that’s better and cheaper than Elon Musk’s car.”

Germany has been a tough market for Tesla to crack, in part because the big German automakers — BMW, Mercedes-Benz and VW – – compete mightily with each other for market share.

Though VW is the focus of investigations, regulators in Europe and the U.S. are increasingly looking at the emissions of other automakers’ vehicles, with focus on discrepancies between lab tests and on-road results.

“The question on a lot of minds is: Are any other automakers cheating on emissions, or ‘optimizing’ for the best emissions results?” said Brian A. Johnson, an analyst with Barclays, in an interview Monday. “Do European consumers go on strike against diesel?”

Three Years

Musk unveiled the Model X in February 2012 at a splashy Los Angeles event featuring California Governor Jerry Brown, with production planned for 2013. Three and a half years later, the first Xs — a limited-edition Founders Series that typically goes to board members and close friends of the company — will be handed over Sept. 29 at a high-profile evening event in Fremont, California, where Tesla has its factory.

Tesla has yet to release detailed specs on the car, but some information and images have been widely circulated online by customers who put down $40,000 deposits to reserve the Signature Series, the limited edition vehicle that comes after the Founders version.

The all-wheel-drive X seats either six or seven passengers. In recent days, images of a six-seat Model X — with two second- row seats instead of three — have appeared in the online configurator. Interior volume is a big issue for potential Model X customers, who want to know if they can fit bikes, skis and other recreational equipment easily into the vehicle. The third- row seats fold flat, according to Tesla’s website.

The car has what it calls “falcon wing” doors that open vertically and a 90 kilowatt-hour battery that is projected to have a range of roughly 250 miles (402 kilometers) per charge. Musk tweeted that with the same options, the Model X will cost $5,000 more than the S due to its greater size. The S starts at $75,000. Tesla designed its first sport utility vehicle in part to appeal to female drivers, as women buy more than half of the small SUVs in the U.S., according to J.D. Power & Associates.

Seeking Growth

Tesla aims to deliver 50,000 to 55,000 vehicles this year, compared with a previous target of 55,000 — partly owing to production snags with the Model X’s complex middle-row seats. Tesla delivered 21,577 vehicles in the first half of the year, which means it must deliver 28,423 vehicles in the second half to meet the lower end of its guidance.

“The VW scandal highlights that the auto industry is under a lot of pressure to comply with tightening emissions standards and fuel-economy laws, and with an internal combustion engine, it’s difficult to conform without realizing a corresponding trade-off in vehicle performance,” said Andrea James, an analyst with Dougherty & Co. “Electric vehicles, and hence Tesla, fall outside of this conundrum.”

Just a few days before the U.S. Environmental Protection Agency and the California Air Resources Board revealed that VW had admitted to deceiving the emissions tests, VW announced at the Frankfurt auto show that it will roll out 20 new electric and plug-in hybrid models by 2020, including the Porsche Mission E and the Audi e-tron quattro.

“Given the investigation timeline, it is highly likely that VW knew about the coming controversy when it made the EV and plug-in hybrid announcement,” said Bloomberg New Energy Finance in a research note to clients Sept. 22. “The scandal could push VW more strongly towards electrification as it looks to improve its public image and meet increasingly stringent fuel economy standards.”

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